Madhusudan Buildcon Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 508/DEL/2014

• Counselvise Citation: 50820114 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Assessee Lawyers: B K DHINGRA DIRECTOR
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.508/DEL/2014 ASSESSMENT YEAR : 2006-07 MADHUSUDAN BUILDCON PVT. LTD., F-6/5, VASANT VIHAR, NEW DELHI. PAN: AAECM1048H VS. ACIT, CENTRAL CIRCLE-17, JHANDEWALAN, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.K. DHINGRA, DIRECTOR DEPARTMENT BY : SHRI AMRIT LAL, JCIT DATE OF HEARING : 15.06.2015 DATE OF PRONOUNCEMENT : 15.06.2015 ORDER THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE CIT (A) ON 30.12.2013 IN RELATION TO THE ASSESSMENT YEAR 2006-07. ITA NO.508/DEL/2014 2 2. THE ONLY ISSUE ARGUED BY THE LD. AR IS AGAINST THE SUSTENANCE OF ADDITION OF RS.20,000/- MADE BY THE ASSESSING OFFIC ER U/S 40A(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN REAL ESTATE BUSINESS. DURING THE COURSE OF THE YEAR IN QUESTION, IT ENTERED INTO A JOINT VENTURE WITH M/S NEWERA SANITA RWARE PVT. LTD. AND M/S YAH SOFTECH PVT. LTD., FOR PURCHASING A PLOT OF LAND ADMEASURING 121 KANALS AND 10 MARLAS, SITUATED AT DEHRI SALAM, VAKA SIWANA MOUJA DHANKOT, TEHSIL AND DISTRICT GURGAON. THE ASSESSEE S SHARE IN THE PLOT IS 25%. WHILE ENTERING INTO THE AGREEMENT FOR THE PURCHASE OF PROPERTY, THE THREE COMPANIES MADE AN INITIAL ADVANCE OF RS.3 5 LAC. WHILE MAKING SUCH INITIAL ADVANCE PAYMENT, A TOTAL CASH PAYMENT OF RS.4 LAC WAS ALSO MADE. THE ASSESSEES 25% SHARE IN SUCH CASH PAYMEN T WAS AT RS.1 LAC. SUCH CASH PAYMENT OF RS.1 LAC WAS RECORDED BY THE A SSESSEE IN ITS BOOKS OF ACCOUNT ON 29.12.2005. IT IS A MATTER OF RECORD THAT SOME DISPUTE AROSE BETWEEN THE PARTIES AND THE DEAL COULD NOT BE FINALIZED AND THE SAME IS STILL UNDECIDED. THE AO INVOKED THE PROVIS IONS OF SECTION ITA NO.508/DEL/2014 3 40A(3) AND MADE AN ADDITION OF RS.20,000/-, BEING 20% OF RS.1 LAC PAID BY THE ASSESSEE IN CASH. THE LD. CIT(A) UPHEL D THE ADDITION. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL AVAILABLE ON RECORD. A COPY OF THE ASSESSE ES TRADING, PROFIT & LOSS ACCOUNT FOR THE YEAR IN QUESTION IS AVAILABLE ON PAGE 12 OF THE PAPER BOOK, FROM WHICH IT CAN BE SEEN THAT THERE IS NO I NCOME AND THE EXPENSES CLAIMED AS DEDUCTION ARE ONLY TO THE TUNE OF RS.4,135/-. THE ASSESSEE PAID A TOTAL SUM OF RS.40 LAC AS ADVANCE O F LAND AT DHANKOT WHICH WAS SHOWN IN THE BALANCE SHEET UNDER THE HEAD `LOANS & ADVANCES. A COPY OF SUCH BALANCE SHEET IS AVAILABL E AT PAGE 11 OF THE PAPER BOOK. IT IS FROM THIS TOTAL ADVANCE OF RS.40 LAC PAID BY THE ASSESSEE THAT A SUM OF RS.1 LAC WAS PAID IN CASH AN D THE AO HAS INVOKED THE PROVISIONS OF SECTION 40A(3) FOR MAKING DISALLO WANCE @ 20% OF SUCH CASH PAYMENT. 5. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS ON THE APPLICABILITY OF SECTION 40A(3), IT WOULD BE APPOSITE TO EXTRACT THE RELEVANT PART OF THIS PROVISION AT THE MATERIAL TIME, AS UNDER:- ITA NO.508/DEL/2014 4 (3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING LATER T HAN 31ST DAY OF MARCH, 1969), AS MAY BE SPECIFIED IN THIS BEHALF BY THE CENTRAL GOVERNMENT BY NOTIFICATION IN THE OFFICIAL GAZETTE IN A SUM EXCEEDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, TWENT Y PER CENT OF SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION . . 6. A CAREFUL PERUSAL OF THIS PROVISION TRANSPIRES T HAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHIC H PAYMENT IS MADE IN A SUM EXCEEDING RS.20,000/- OTHERWISE THAN BY AC COUNT PAYEE CHEQUE ETC., THEN, TWENTY PERCENT OF THE AMOUNT PAID IN CA SH IS DISALLOWABLE. THUS, IT BECOMES APPARENT THAT IN ORDER TO INVOKE T HE PROVISIONS OF SECTION 40A(3), IT IS SINE QUA NON THAT THE ASSESSEE MUST HAVE INCURRED EXPENDITURE IN RESPECT OF WHICH SUCH PAYMENT IS MAD E IN CASH. SECTION 40A HAS THE MARGINAL NOTE: EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRCUMSTANCES. THIS SECTION HAS BEEN PLACED UNDER CHAPTER IVD OF THE ACT. SUB-SECTION (1) OF SECTION 40A PROV IDES THAT : THE PROVISIONS OF THIS SECTION SHALL HAVE EFFECT NOTWIT HSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISION OF TH IS ACT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD 'PROFITS AND G AINS OF BUSINESS OR PROFESSION'. A CURSORY LOOK AT THE ABOVE PROVISION S DIVULGES THAT IN ITA NO.508/DEL/2014 5 ORDER TO MAKE ANY DISALLOWANCE UNDER SECTION 40A(3) , IT IS A PRE- CONDITION THAT THE ASSESSEE MUST HAVE CLAIMED DEDUC TION, DIRECTLY OR INDIRECTLY, FOR WHICH PAYMENT IS MADE IN CASH EXCEE DING THE SPECIFIED LIMIT. PER CONTRA , IF THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION, DI RECTLY OR INDIRECTLY, EVEN IF THE PAYMENT IS MADE IN CASH , THE PROVISIONS OF THE COMPUTATION OF INCOME UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION SHALL NOT APPLY TO THAT EXTENT AND SECT ION 40A(3) WILL BECOME NON-OPERATIVE. 7. I AM CONFRONTED WITH A SITUATION IN WHICH ALB EIT THE ASSESSEE MADE PAYMENT OF RS.1 LAC IN CASH TOWARDS ADVANCE FOR PUR CHASE OF A PIECE OF LAND, BUT, NO DEDUCTION WAS CLAIMED FOR THIS SUM. THIS AMOUNT HAS BEEN DIRECTLY TAKEN TO THE BALANCE SHEET AND HAS BEEN SH OWN AS ADVANCE UNDER THE HEAD LOANS AND ADVANCES. UNDER SUCH CIRCUMSTA NCES, WHEN THERE IS NO CLAIM FOR DEDUCTION OF RS.1LAC, THE PROVISIONS O F SECTION 40A(3) CANNOT BE ATTRACTED FOR MAKING ANY DISALLOWANCE FOR A SUM OF RS.20,000/- AS THIS PAYMENT IS NOT TOWARDS ANY EXP ENDITURE INCURRED ITA NO.508/DEL/2014 6 DURING THE YEAR AND HAS NOT BEEN CLAIMED AS DEDUCTI ON BY THE ASSESSEE. I, THEREFORE, ORDER FOR THE DELETION OF THIS ADDITI ON. 8. NO OTHER GROUND WAS ARGUED BY THE LD. AR. SUCH GROUNDS, THEREFORE, STAND DISMISSED AS NOT PRESSED. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.06.20 15. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED, 15 TH JUNE, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.